Cost Recovery

Question 1

Mid-Year Convention

Answer 1

Personal Property

6 months depreciation in month acquired/disposed

Question 2

Mid-Month Convention

Answer 2

Real Property

1/2 month depreciation in month acquired/disposed

Question 3

Mid-Quarter Convention

Answer 3

Personal Property when > 40% tangible personal property was placed in service in the last 3 months of the tax year

1st qtr - 10.5 months
2nd qtr - 7.5 months
3rd qtr - 4.5 months
4th qtr - 1.5 months

Question 4

MACRS Tables usage

Answer 4

Ignore salvage value and accumulated depreciation

Always use original cost

In year sold, multiply by 1/2 as tables don’t know when sold

Question 5

7-Year property

Answer 5

Equipment
F&F

Question 6

3-Year property

Answer 6

Small tools
Off the shelf software

Question 7

5-year property

Answer 7

Automobiles - cars, trucks
IT hardware - computers, copiers
Farm equipment

Question 8

10-year property

Answer 8

Water transportation equip
Vessels - barges, tugboats

Question 9

Section 197 Intangible (Depreciation)

Answer 9

180 Months Amortization

Question 10

Section 179 Personalty

Answer 10

Acquired by purchase for:
- active trade or business
- in the U.S AND
- from unrelated party

Tangible personal property
off the shelf computer sw
certain imprv to non resid bldg